Eastern Takeover Bid Fails

June 06, 1989|By Charles Storch and Nancy Ryan.

An investor group led by Chicago options trader Joseph Ritchie failed to win support for its buyout proposal of Eastern Airlines before a court-imposed deadline expired Monday, but the group vowed to continue pursuing the strike- crippled carrier.

The Ritchie group`s proposal is backed by Eastern`s major unions but has been blocked by Eastern`s parent, Texas Air Corp. With Texas Air refusing to sell Eastern to the Ritchie group, a committee of Eastern creditors conceded Monday that the group`s proposal was ``not feasible`` and directed its efforts to negotiating a reorganization plan for Eastern with Texas Air.

In New York, U.S. Bankruptcy Court Judge Burton R. Lifland, who has been presiding over Eastern`s Chapter 11 reorganization proceedings, had extended a deadline of last Friday to Monday for the Ritchie group to gain support for its buyout plan.

The extension was granted after Eastern`s major unions said they would accept additional wage and other concessions in support of the Ritchie plan.

Representatives of the Ritchie group, the airline unions and Texas Air met Saturday to discuss the buyout proposal, which includes an equity investment of about $100 million and as much as $400 million in wage and other concessions by the unions.

But Texas Air rejected the proposal as inadequate.

Joel Zweibel, an attorney representing the creditors committee, said the Ritchie group`s proposal ``was interesting and constructive, but not feasible due to the absence of consent by (Eastern`s) equity holder,`` Texas Air.

Ritchie, who was in New York earlier in the day, held a press conference after arriving Monday evening at O`Hare International Airport. Although his proposal was rejected by Texas Air, he said Lifland had, in effect, given his group an ``indefinite extension`` to try to reach a deal with Texas Air.

He said the judge`s action was ``the best that could have happened``

under the circumstances.

The Ritchie group and Eastern`s unions are scheduled to meet Wednesday in Washington to discuss their proposal with David Shapiro, the court-appointed examiner for the Eastern bankruptcy proceedings.

Shapiro has been investigating the management of Eastern by Texas Air and, if he finds evidence of fraud or other misdeeds, could recommend to Lifland that a trustee be appointed to run Eastern. If appointed, a trustee could negotiate a sale of Eastern with the Ritchie group or other potential buyers, according to Dan Ashby, a spokesman for the Air Line Pilots Association.

The pilots have been honoring a 3-month-old strike by Eastern`s machinists union. The strike has crippled Eastern and forced the carrier to seek protection from creditors under Chapter 11 of the federal bankruptcy code.

Ritchie expressed praise for Eastern`s unions, who he said ``are striking not for money, not for work rules, but so that they can change the work environment and really work.``

Texas Air has proposed reorganizing Eastern by selling $1.8 billion in assets and sharply scaling back its operations.